Posted February 21, 2017

Merger Success and Culture: Lessons Learned from Healthcare Leaders

What defines a successful health system merger? Many would say a bottom line in the black. But, if financial performance is the only pre-merger focus, is that enough to sustain success?

Before and during a healthcare merger, leaders who fail to realize the impact of culture on results like financial performance and patient safety put the entire deal at risk.

Studer Group recently hosted a round-table event bringing together health system leaders from across the country to provide their insight and knowledge on what makes mergers work. Throughout the event, the one word that kept surfacing was “culture”. Yet culture is rarely the initial reason for two organizations to join forces. Leaders tend to think of culture as soft, immeasurable and less concrete of an outcome than revenue. But when millions or potentially billions of dollars are at risk, culture becomes an important part of the equation.

“Culture is nebulous and difficult to define, and it means a lot of different things to different stakeholders,” said Michael Wiechart, former president and chief executive officer of RCCH HealthCare Partners. “Research suggests that 60 to 80 percent of mergers don’t yield their intended benefit and culture is often the driver of the failure. What I think is interesting is that culture is not what you think you are, but the sum total of all the things you do and your results. When you are in the acquiring phase, there is a tendency to look at who you’re courting and say ‘we really value the same things’ and you start to have these conversations that are leading you to determine that you are culturally aligned, which may or may not be the case.”

In fact, that is exactly what happened between Henry Ford Health System and Beaumont Health System referenced in this article. The two organizations ultimately decided not to pursue a $6.4B merger due to cultural differences.

Communication comes first

How can organizations that believe they are a cultural fit for merging ensure a successful transition? By properly preparing clinicians and staff for change. That preparation must come from abundant and transparent communication. The advice from the leaders at our forum was clear: during a merger, put aside any concerns you have of over-communicating.

“When there is time of uncertainty, you cannot communicate enough,” said Debbie Landers, former Senior Vice President for Jarrard Phillips Cate & Hancock engagement firm. It’s important to have key messages repeated multiple times. It can be compared to an advertising campaign, which takes exposure to an ad ten times for a consumer to remember your message. Landers shared one of the best examples she experienced through a major system merger regarding leadership setting, “We pulled over 200 c-suite leaders together and set the stage for the culture of the new combined company. We communicated expectations for moving the business forward and setting clear expectations for roles. There were about dozen leaders who left that meeting saying ‘thanks but this culture isn’t for me.’. Setting clear expectations helped then opt out and helped us clear the stage for success.”

“Transparency pre- and post-merger is critical,” added Wiechart. “Do not retrench and stop dialogue with stakeholders. It’s hard to say you can over communicate in the first 12 months. As a leader, you find yourself repetitively sharing this stuff and you get tired of hearing yourself say it, but you can’t say it too much. Blogs, emails, town halls, pick the venue; you can’t communicate enough. If there is tough news, be straightforward.”

For a merger or acquisition to be successful, it’s important for those leaders making final decisions to consider the potential impact of the deal at all levels of the organizations. Anyone who can influence success or failure based on their level of buy-in should be categorized as a stakeholder. Information must be cascaded from leadership to key stakeholders, all of whom influence the transformation.

“Leaders have to get in front of surgeons, get feedback, and make them feel involved,” said Philip Eichenholz, MD, president and founder of Northstar Anesthesia. “Sometimes communication involves putting on scrubs and getting in the operating rooms. Go where the stakeholders are and make everyone feel like they are in the same environment.”

In organizations coached by Studer Group, leader rounding on staff is a Must Haves® tactic. In the case of a merger or acquisition, communicating the why behind change through rounding becomes mission critical. Leaders meet regularly with staff and ask carefully constructed, standardized questions to measure engagement, gain feedback at all levels and identify potentially damaging issues.

Prepare for Change

Mergers and acquisitions of hospitals and health systems are more common now than ever before, and the trend is likely to continue. For-profit and not-for-profit health systems are all looking for ways to more efficiently deliver care. However, integrating two or more organizations into one cohesive operating unit takes intense planning and a particular focus on the post-merger logistics.

“I think that acquisitions are often easy to get done but not easy to make work. If you can’t figure out how to make change work, then acquisitions will all fall,” said Eichenholz.

Gaining trust and buy-in from employees before, during and after the process is critical for change to take place.

“No one wants their culture changed. If you go in and say ’I’m here to change your culture,’ the walls go up,” said Mike Schatzlein, MD, senior vice president and group ministry operating executive for Ascension Health. Dr. Schatzlein added that an authentic and transparent approach is particularly important when speaking to medical staff. “Be who you say you are through the whole deal. The handoff from acquisitions to operations has to be seamless.”

Helping employees, clinicians and patients understand why the merger is happening is also vital.

“Every public company is always for sale because their shares trade everyday but this has no impact on individual facilities. If you’re not buying, you’re selling. you’re always looking for ways to grow and strengthen the organization, that is the answer,” said Jay Hoffman, senior vice president of business development for IASIS Healthcare. “Be cognizant that communication needs to be much quicker now because of social media, and be prepared with answers that are factual and believable but prepared confidentially.”

“I think one of the two non-financial reasons why organizations move forward with a transaction is determining what services are actually needed over a defined region and creating a regional integrated care system. Or, there are leadership succession issues; maybe they don’t feel like they have the structure in place to take the organization to the next level. Either way, it’s the right outcome for communities,” added Wiechart.

The right outcome for communities and patients has to start with the right planning for cultural alignment. While culture can be difficult to define, and the issues related to culture may vary from organization to organization, there are standardized approaches and tactics that can be deployed to build alignment and buy-in during a merger. With mergers on the rise, organizations who invest in building strong cultures stand to benefit.

Studer Group specializes in cultural integration and standardization across national health systems and has successfully guided many organizations through mergers and acquisitions. To learn more about coaching partnerships, download complimentary resources or to hear how other health systems are navigating similar challenges, visit our Health System Partnerships page on StuderGroup.com.

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